As we examine the entrails of Wall Street's still rotting corpse, it doesn't take the gifts of an augur to foretell our postcrash future. It will, at least temporarily, be one of asceticism. Conspicuous consumption is the new smoking. Wealth, and the desire for it, have become character flaws.
The bankers we want to see pilloried, imprisoned or disembowelled – a sentiment whose intensity, judging from the tabloids, appears to be inversely related to our incomes – have outdone themselves in their ability to make us hate them. And they just keep on outdoing themselves, as demonstrated by the $165-million (U.S.) that American International Group Inc., now a ward of the state, just paid out in retention bonuses to many of the same top executives who drove the insurance giant, and the rest of financial system, into the ground.
Even the most measured among us nod at headlines such as: “Not So Fast You Greedy Bastards.” This outrage, like this financial crisis, is global. In Britain, it has found its whipping boy in Sir Fred Goodwin, who “retired” at 50 as the head of the Royal Bank of Scotland in November, claiming a full pension worth more than £700,000 a year. This is the same Sir Fred whose disastrous deal-making drove the bank to a £24-billion loss in 2008 – the biggest in British corporate history – forcing Gordon Brown's government to put up billions in bailout money. “Off with his Fred,” The Mirror blared.
In Canada, where our banks' legendary lethargy has turned out to be their saving grace, the chief executives at the Big Six had the good sense to voluntarily forgo bonuses for 2008 lest they get us hankering for the return of capital punishment. Perhaps sensing the mob's appetite for blood, they also agreed – not all of them willingly, mind you – to submit executive compensation to non-binding shareholder votes. Giving investors a “say on pay” is, by the standards of Canadian banking, a revolution in itself.
A PRETEXT TO SOAK THE RICH
If U.S. President Barack Obama needed a pretext to soak the rich, the AIG executives and their ilk have certainly given him one. It hardly seems coincidental that such a progressive politician as Mr. Obama was elected on the heels of the most protracted rise in income inequality in the United States since the one that began with the Gilded Age in the late 19th century. That boom ended with the Depression, a cataclysm brought on in part by the same kind of financial speculation that created the current mess. Those who are still wondering why they didn't see this crash coming were probably just not looking at the right data. Instead of wondering whether stocks were overvalued, derivatives were ticking time bombs, or housing was in a bubble, they should have just looked at how skewed income distribution had become.
Just as the New Deal would likely not have been possible without the Depression as its catalyst, Mr. Obama's attack on income inequality would face a much tougher row to hoe were it not for AIG and all it represents. The era that spanned from Franklin Roosevelt to Lyndon Johnson was one of rising real wages that culminated in the most equal distribution of wealth in U.S. history. Is that history about to repeat itself?
